The Advisory Committe is needed becasue the detail of how the change to Local Housing Allowance / Housing Benefit rates will be managed in practice will be interesting and the government will need to tread very carefully and will have to make sure they look after the needs of the old, the sick and the HB claimants with young families in all this or they could be facing a PR disaster. Visions of vulnerable people being forcibly moved from expensive central London boroughs to cheaper neighbouring boroughs are very worrying.
As someone who works entirely advising organisations on the private rented sector, I’m interested to read here on IH, the various views that readers have on private landlords. It’s certainly another “take” on things with private landlords sometimes cast as the villains of the housing piece. Is this fair?
Well, some of them sure aren’t angels. But post Thatcher and the sale of swathes of council stock, we don’t see anyone else (including the city institutions, still hungry for tax breaks to induce them to enter the PRS) providing much accommodation just now, so I guess local authorities will just have to learn to live with their private landlords.
Certainly, many private landlords targeted areas where they knew the LHA rates were (up to now) pretty generous relative to the capital values of properties. They invested in these areas for the sometimes very good yields knowing that the level of local LHA dependency was sufficiently high and that the government (by setting LHA based on median local rents) was actually bidding up and in effect, setting overall rent levels in some areas of high benefit dependency. And since landlords and tenants knew what was payable (because the figures were published by the Valuation Office), many rather unsurprisingly tended to set rents at the maximum payable by the state under LHA.
Now, following the last budget and the caps on LHA levels, these landlords will have to think again – which goes to show the risk to them of developing an investment and lettings business based on what the government does. Some may sell but we think that outside the more expensive inner London borough, private landlords will come to realise that in reality in many cases they cannot get any more than the new 30th percentile rates from non-LHA-dependent tenants. For these landlords the LHA gravy train doth end here! And so it should despite the protestations from some landlord groups and associations. Basically, many private landlords in some areas have had it too good for too long and cutting LHA rates will, I’m sure, actually lead to reduced rents overall in many areas. And so, from the point of view of the taxpayer the proposed changes could be a good thing.
However, as I said at the top of this comment, what’s proposed by the government is a sharp and blunt tool and they absolutely must ensure the vulnerable are protected -so some serious tweaking to LHA proposals must be put in order.
Turning to more expensive areas like Westminster and K and C, where the effect of the cuts are much greater, how many of their private landlords will stop taking LHA dependent tenants and / or sell their properties or just accept that they are not going to get as much in future is a big question but with a bit of quick but targeted research this is a question that can be answered within weeks. And those involved in housing at local authorities must surely start finding out the answers to these questions pretty quickly because the result of the changes to LHA rates could be that a lot more people will be seeking housing in the less expensive boroughs of London. These neighbouring boroughs will need plans to manage the possibly fairly large numbers seeking housing and they will need them fast.
Certainly, we think, local authorities will now also need to get a whole lot smarter with their private rented sector access schemes. And if they have not already done so, the local authorities, especially in the more expensive London boroughs will need to team up seamlessly with other outer boroughs to find housing solutions for those who will find themselves priced out of some areas. As part of this and as a minimum, LHA processing systems must be made faster, especially at making payments direct to private landlords if their Local Housing Allowance dependent tenants don’t pay their rent. If there is a failure to deliver this, private landlords could really start to desert the business of letting to LHA dependent tenants (starting with the more up market boroughs first.) Another way forward to local authorities is the PRS access schemes, where they will need to be sharper at finding good landlords cheaply. One way to do this would be to use the internet much more effectively and review the cost effectiveness of localised letting schemes and local advertising campaigns to attract landlords.
On this topic, many studies have shown that private landlords aren’t too bothered about being incentivised to let to benefit dependent tenants. It’s our opinion that landlord incentives like bond guarantees used by many local authorities are not the most efficient way of incentivising private landlords. All landlords really want is their rent to be paid on time, every time and with the minimum of hassle.
People working in local authorities may not like having to depend on private landlords so much. I can understand this and as a landlord myself I agree with most of them that selling off council homes was a huge policy mistake. But that’s what happened and is now history. And so, going forward local authorities and others in the business of the housing will have to accept that they will have to continue to depend on private landlords to house people. Their challenge is to make sure they properly engage with landlords.